Share buybacks by China-based global conglomerate Tencent Holdings Limited (HK:0700) have soared to new heights following the regulatory turmoil that jolted Chinese gaming stocks. The company completed share buybacks worth HK$10 billion last month after its shares tumbled around 12% on December 22. Companies often repurchase shares after a sell-off to reassure investors about their future growth prospects.
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Tencent Holdings is a prominent technology conglomerate serving over 1 billion users.
Tencent Increases Buybacks
In December, the Chinese regulators unveiled fresh measures to curb excessive spending on video games across the country, impacting the gaming industry players after a year of robust growth. These controversial measures included a ban on daily login rewards, restrictions on recharging, and in-game spending curbs, among others. These measures reignited investors’ concerns about the potential implementation of stringent measures similar to the crackdown on the internet sector in 2021.
Since then, Tencent has significantly increased its daily share purchases to around HK$1 billion. This marks a substantial uptick compared to the daily average of HK$375 million observed last year before the regulatory measures were implemented.
The Share Price Performance
In 2023, Tencent’s stock experienced a decline of approximately 14% in its value, reaching a low point of HK$274 in December. Following this dip, the stock recently recovered after China removed Feng Shixin from his position as the head of the publishing unit of the Communist Party’s Publicity Department. The department oversees the regulatory body for China’s gaming industry, and his removal provided a sense of relief to investors.
The stock is currently trading at HK$299.
Is Tencent a Good Stock to Buy Now?
Yesterday, analyst Charlene Liu from HSBC reiterated her Buy rating on Tencent stock, predicting an upside of 38% in the price.
According to TipRanks’ rating consensus, 0700 stock has received a Strong Buy rating, backed by 11 Buy and two Hold recommendations from analysts. The Tencent share price forecast is HK$432.9, which implies an upside of 44% on the current trading level.
